I used to previously work for a listed technology company in the US and had received restricted stock units (RSUs) of the company while I was still working there. I changed my job in 2022 when I returned to India. I am considering selling these RSUs. How will my foreign RSUs get taxed in India?
—Name withheld on request
Since you have been residing in India since 2022, I assume that you are a resident and ordinary resident (ROR) in India. As an ROR, your global income is taxable in India, which includes any gains arising from the sale of foreign RSUs.
For Indian tax purposes, shares listed on foreign exchanges are treated as unlisted securities because they are not listed on a recognized Indian stock exchange.
Holding period
The taxation upon their sale would depend on the holding period. Assuming you have received the RSUs before 2022, your holding period exceeds 24 months, and the resulting capital gains would be classified as long-term. Long-term capital gains on unlisted securities are taxed at 12.5% (plus applicable surcharge and cess).
Further, once you become an ROR, foreign assets such as RSUs must be reported in Schedule FA of your Indian tax return for each year that you hold them.
In the United States, if you are considered a non-resident alien, capital gains from selling RSUs are generally not taxable. Consequently, no foreign tax credit would be available or required in India in this case.
I am an NRI from the UAE having been residing there for the past two decades. I have recently received a summons from the Income Tax Department – FAIU seeking information regarding my foreign bank account and asking me the reason for not reporting the same in my Indian Income Tax Return. Any advice will be helpful.
– Name withheld on request
The Foreign Assets Investigation Unit (FAIU) is a specialised wing of the Income Tax Department responsible for examining undisclosed foreign income and overseas assets. Summons are often issued when a taxpayer’s PAN status continues to reflect “resident” even though the individual has been filing returns as a non-resident.
Given that you have lived in the UAE for the last two decades, you qualify as a non-resident for Indian tax purposes. Non-residents are not required to disclose foreign assets or foreign-sourced income in Schedule FA of the Indian income tax return.
FAIU communications typically do not specify the period for which information is sought. If you have been a non-resident throughout the entire duration of holding and operating the foreign bank account, you may submit a written response explaining your non-resident status. If your residential status changed during any period of operation of the account, you should outline the relevant timeline and clarify the years in which you were a non-resident.
Harshal Bhuta is partner at P. R. Bhuta & Co. CAs
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